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V2865-19 17 October 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del capital inmobiliario

Leasing of commercial premises is subject to VAT and corporate tenants must withhold Income Tax

A landlord sought clarification regarding the taxation of commercial premises leased to a religious association. The Directorate General for Tax (DGT) ruled that the transaction is subject to VAT as it does not constitute residential property, and that the tenant is required to apply Income Tax (IRPF) withholding.

The question raised

Taxation of monthly income under Personal Income Tax.

The DGT's ruling

Income from the lease of urban real estate, if not an economic activity, constitutes income from real estate capital. The lessee, being a legal entity, is obliged to apply withholding tax under Personal Income Tax (IRPF) except in legal exceptions. Regarding VAT, the lease of a commercial premises is subject to the tax, as the exemption only applies to buildings intended exclusively for residential use.

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